July 13th 2016: Tensions in South China Sea

• This morning, the Japanese yen is on the rise after a court ruling in favour of the Philippines regarding the sovereignty of islands across the region. The ruling creates uncertainty with regard to China’s reaction as it now faces a humiliating climb down. The USD/JPY is trading lower along with other yen pairs.

• The US dollar is slipping lower as money flows back into the yen.

• The Australian and New Zealand dollar is under pressure on a similar theme as the prospect of military conflict in the region weighs in.

• Meanwhile, the pound continues to perform well following the appointment of Theresa May as the new PM and the prospect of a rapid triggering of article 50.

• Coming up today we have the Canadian rate statement at 15.00, with the press conference at 16.15.
• US crude oil inventories follow at 15.30.

Trade Idea: 

• The GBP/AUD has rallied these last two days, but the UK has to face two years of uncertainty as it negotiates its release from the EU. Therefore the rally seen over the last two days could be a selling opportunity for the GBP/AUD.

• A good way to play this is a LOWER trade predicting that the GBP/AUD will close below 1.7400 in 14 days for a potential return of 143%.

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